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Foreclosure and the USDA

Some Federal government agencies, such as USDA (U.S. Department of Agriculture), are more of the prosecutors of foreclosure.  The borrowers of loans insured by the USDA do not have the same foreclosure protections or options as conventional borrowers.  See the example below:

Mr. Ward’s lender isn’t a bank. It is the U.S. Department of Agriculture’s Rural Housing Service, which provides mortgage loans to rural homeowners and guarantees loans made by banks. It accounted for at least a third of all mortgages issued in 2010 in sparsely populated areas such as Morton County, Kan., and Sioux County, Neb., according to data reported under the Home Mortgage Disclosure Act.

Unlike private firms, the USDA doesn’t need permission from a court to start collecting on unpaid debts. It can in some cases seize government benefits and tax refunds before a foreclosure is completed. After foreclosure, the USDA can go after unpaid balances, even in states that limit such actions by private lenders.  See The Wall Street Journal.

Preventing Foreclosure of USDA Home Loan

The USDA has a web page and a phone number for borrowers to call to start discussions about foreclosure prevention for one of their loans.  They offer a payment plan to help people get caught up with their mortgage payments and help with paying utilities.  There is even credit counseling available if you want it.This is not a type of debt settlement.

USDA Foreclosure Bottom Line

While there are programs to help people who borrow mortgage money insured by the USDA avoid foreclosure, many of the protections that are present for commercial borrowing do not exist for the USDA-insured borrower.  That does not mean a mortgage loan insured by the USDA is a bad idea, it just means the risks should be considered before signing the dotted line.  There is no debt settlement option.

To get more insight in to this issue, phone Axsmith Law at (202) 285-5415.

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